The long put is a hedge already to the short put. To hedge it further with other instruments, you risk overhedging which is meaningless and it cuts into your profit. If you really feel that bearish for the underlying, then you should've just done a bear call spread or simply buy the long. So anyway if you do have a bullish outlook about the company for the next few weeks, then leave your position be and see what happens.
The option is expiring on Aug. 12, the same day as it goes ex-dividend. You think the ex-dividend drop is going to be that large? How much is the dividend?
According to barchart.com, the dividend is $1.126 per share. So I expect a drop of 1.13 at the open next Friday. My breakeven is at a stock price of 12.35. Last close was 14.45. With a drop of $1.13, that would put the stock price at 13.32, still above the breakeven point. I think I can sell my long put and buy another put nearer the money, which will limit the loss to zero or a small profit, while maintaining the potential for a reward of $100 per contract. Alternatively, I could nothing, and leave the risk at a potential loss of $35 per contract, with the possible reward of $165 per contract.
What is your PnL calculation basis? Ie. the margin or cash requirement the broker wants as collateral. Are you trading this spread in a CashAcct or in a MarginAcct? Here's a hot info tip for you & everybody for reducing the margin requirement (for more profit, percentwise as well absolute when the available capital is optimally used) with such spread trading): "Vertical Spreads: Lower Margin Requirement Hurdle to Target Capital Efficiency" S.a. a recent discussion about this topic of vastly reducing the margin (or cash) requirement when trading such spreads.
The problem is with the short put, not the long put. If you expected that the price would be at 12.XX. I am still puzzled why you would choose to sell the put at $14. That's like giving the money away by making a sure loss. Like I said, the most prudent thing to do would be to sell the put at $12.00 or at least below your expected price at expiry cuz what you are doing is a bull spread. It's a combo that you do when you expect the price to go up and not drop below the short put strike.
This morning, I sold my 12 strike put and bought a 13.5 strike put for a debit of 0.97 per contract. With that adjustment, I locked in a minimum gain of $18 per contract, and a maximum of $68 per contract. In addition, I also tracked down the press release from the company regarding the dividend. There is a special and regular dividend going ex-div on August 12, which together total about $1.30. Therefore, I anticipate the stock price to open down on Friday by $1.30. I'm not sure if the adjustment was advisable. The stock gapped up today, and closed near the high of the day at $15.34. I am expecting both my short and long puts to expire worthless this Friday. Nonetheless, there are a couple of unfilled gaps in the chart now, one starting at about $13.50 and another about $14.50, and there is a trading maxim about retracements to fill gaps.
Skew??!! Why would skew be relevant here when it's the underlying's PA that's going to dictate everything? Why don't you come up with the argument for skew?
Did you look at any upside call spreads to sell? Where were the 1 or 2 point spreads trading with the strikes 14,15 ,16,17??? You may have been able to create a fly like structure with better reward to risk..